When discussing insured value and how a boat insurance policy will pay, most people think about a total loss.
This is important but the majority of claims are partial losses. Depending on how your policy responds could
cost you several thousand dollars above your deductible.
A boat insurance policy has two different ways to pay in the event of a partial loss. One is to replace the
damaged items new for old without deducting for depreciation. The second is to depreciate the damaged items
in the event of a loss.
Depreciated Value is defined as Replacement Cost less depreciation. Most boat insurance companies use a non
published depreciation schedule that applies to partial losses. An example may be 7% depreciation per year
on a stern drive or 15% depreciation per year on canvas. You will want a policy that pays replacement cost
for a partial loss when available.
Each insurance company will apply Replacement Cost and Depreciated Value differently. See
on how each of our programs settles partial losses.
Some boat insurance companies do not provide replacement cost coverage for partial losses. If the boat is
insured on this policy form, then no matter the type of loss, the replacement parts are subject to depreciation.
If the part costs $2,000 and is subject to 20% depreciation, you would be paid $2,000, less $400 depreciation,
less your deductible.
Some boat insurance companies provide replacement cost for partial losses until the boat reaches a certain age.
The age will vary with each insurance company. Once a boat reaches that age, all partial losses are settled on an actual cash
Most boat insurance companies that provide replacement cost for partial losses name specific items that are
subject to depreciation. Canvas, sails, cloth, trailers, and plastics are examples of specifically named items.
These items generally have a limited life span. They also specifically name items to be
depreciated based on the item’s age. Outboards, stern drives and internal machinery are examples of items
that change from replacement cost to depreciated value based on their age. Each insurance company has
different specifically named items and different ages when items change from replacement cost to actual cash
value. Review the specifics of our programs for details.
Replacement Cost for a partial loss is what you want when available. A depreciated value can cost you several
thousand dollars. Below are examples to help explain how replacement cost vs. depreciated value work.
Example 1 is an 11 year old boat with a $250 hull deductible that hits a submerged object. The replacement cost of
the damage to the prop, shaft and strut is $5000.
Insurance company A provides replacement cost coverage until the vessel is three years old. The damaged prop,
shaft and strut are 11 years old and subject to depreciation. Insurance company A will deduct 50% depreciation
or $2500 from the $5000 replacement cost. You would be paid $2,250 ($5,000 replacement cost, less $2,500
depreciation, less your $250 deductible).
Insurance company B provides replacement cost coverage with specific named items subject to depreciation.
The prop, shaft and strut are not specifically named items and are therefore settled on a replacement cost.
Insurance company B would pay $4750 ($5000 less your $250 deductible).
Example 2 is an 8 year old stern drive boat with a $500 hull deductible that hits a submerged object. The
replacement cost to the stern drive is $8000.
Insurance company A provides replacement cost coverage until the stern drive is six years old. They will
apply 60% depreciation (7.5% per year) to the $8000 replacement drive and then apply the $500 deductible.
Insurance company A will pay $2700 ($8,000 less $4,800 depreciation, less $500 hull deductible).
Insurance company B provides replacement cost coverage until the stern drive is 10 years of age. They will
pay $7500 ($8000 less the $500 hull deductible).
Example 3 is a boat with a $500 hull deductible that suffers wind damage to the fly bridge enclosure. The
fly bridge enclosure is 2 years old and the replacement cost is $5000.
Insurance company A provides replacement cost until the fly bridge enclosure is three years old. They will
pay $4,500 ($5,000 less the $500 hull deductible).
Insurance company B provides replacement cost but specifically names canvas as a depreciated item. Insurance
company B will apply 20 percent depreciation to the replacement cost. They will pay $3,500 ($5000 replacement
cost, less $1,000 depreciation, less the $500 hull deductible).
There are other items to consider. For example, if the stern drive has to be replaced, most companies will
apply a reduced depreciation if you agree to a remanufactured stern drive. This can save thousands of dollars
in depreciation. We represent one insurance company that applies no depreciation for a remanufactured unit.
Also, depreciation is only applied to parts (real property). Depreciation is not applied to labor, storage
charges and other non real property items.
View complete details on total loss.
Review our in-depth Boat Insurance Guide.
See our side by side comparison of the programs represented
by United Marine.